2015 (6) TMI 484 - AT - Income Tax

Computation of short-term capital gain - non inclusion of cost of acquisition of the asset and the cost of any improvement thereto - Held that - FAA has made a detailed analysis of each item of expenditure claimed by the assessee towards the improvement of the asset as well as incurred in connection with the transfer. It is to be appreciated that assessee has claimed expenses of ₹ 1,55,750/- incurred towards fertilizer and matipuran. The total land is measuring 2675 sq.mtrs. which is just equivalent to half acre of land. Even somebody wants to put warmi-post or cowdung as fertilizer it cannot cost ₹ 1,55,750/-. The land has been sold as an agricultural purpose. This is highly exaggerated amount which has been claimed by the assessee without submitting any evidence. Similarly the assessee has claimed that he must have filled the land with sand for leveling purposes though no direct evidence has been placed on record. The assessee could only produced his account as well as account of his sons wherein their books, they have claimed incurred expenditure but the assessee could not bring any demonstrative evidence exhibiting that some physical changes were brought in the asset. Considering the well reasoned finding of the CIT(A) vis- -vis the claim made by the assessee, we are of the view that ends of justice would meet if a sum of ₹ 1,50,000/- is allowed to the assessee on an estimate basis for leveling and putting some fertilizer etc. towards improvement of the asset. The ld. AO shall recomputed the capital gain after allowing the improvement cost of ₹ 1,50,000/- to the assessee. - Decided partly in favour of assessee.

Summary

Issues:
Computation of short-term capital gain

Analysis:
The appellant contested the computation of short-term capital gain by the ld. CIT(A), arguing that the amount was erroneously determined. The case involved the purchase and subsequent sale of agricultural land, with the appellant claiming expenses for land improvement. The AO rejected the claimed expenditure, stating that the appellant failed to provide sufficient evidence to substantiate the expenses. The ld. CIT(A) upheld the AO's decision, emphasizing the lack of evidence for the expenses claimed by the appellant. The appellate authority meticulously analyzed each claimed expense, highlighting discrepancies and lack of supporting documentation. The appellant's arguments regarding expenses incurred for stamp duty, advocate fees, and land improvement were thoroughly examined and ultimately dismissed due to insufficient evidence. The ld. CIT(A) concluded that only the cost of land acquisition could be considered as an allowable expense, leading to the computation of short-term capital gain at a higher amount than initially declared by the appellant.

The Tribunal, upon careful review of the facts and circumstances, acknowledged the detailed analysis conducted by the ld. CIT(A) regarding the claimed expenses. While recognizing the exaggeration and lack of evidence in some of the claimed expenses, the Tribunal allowed a nominal amount of &8377; 1,50,000 as an estimate for land improvement. This adjustment was made to ensure fairness and reasonable consideration of expenses related to asset improvement. Consequently, the Tribunal partially allowed the appeal, directing the AO to recalculate the capital gain by including the approved improvement cost. The decision aimed to strike a balance between the appellant's claims and the necessity for substantiated evidence in determining capital gains accurately.

In conclusion, the judgment highlighted the importance of providing concrete evidence to support claimed expenses, especially in cases involving capital gains from property transactions. The meticulous scrutiny of expenses and the emphasis on substantiating documentation underscored the significance of transparency and accuracy in tax assessments. The decision to allow a nominal improvement cost while dismissing exaggerated claims exemplified the Tribunal's commitment to fair and just outcomes based on thorough examination and reasoned judgment.